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Distribution debunked to unlock growth

A localized route-to-market approach is the key to success in emerging markets

OVERVIEW

Expanding into emerging markets is often a priority growth area for multinational consumer goods companies. But to succeed, they can’t go it alone. In fact, they need local help more than ever, particularly from distributors already on the ground. When it comes to distribution, multinationals should look to build an ecosystem of local partners who can help them penetrate these markets at a lower cost and quicker pace. Route-to-market matters more than ever—and “ecosystem” needs to become more than just a buzzword in any large consumer goods company expanding its presence around the world.

KEY FINDINGS

Multinational consumer goods companies must identify when a direct-to-store model would be most appropriate, and when leveraging local distributors would be more effective.

A balancing act

Local consumer goods players partner twice as much with distributors as multinationals in emerging markets. In doing so, they overcome size limitations and enable flexibility in their assets. By over-relying on a direct-to-store model while under-leveraging local distributors, multinationals are missing out on the 25-35% growth that locals have achieved.

Grow your own

Finding a suitable local distributor can be a challenge. However, some companies are “growing their own distributors” through close partnerships and joint ventures that often result in the distributor expanding into new markets.

Partner like you mean it

The alignment must be done in a way that considers the distributors as part of the company, such as an extended commercial arm of the business. Through such a tight integration, local distributors can provide multinationals with access to previously untapped points of sale and new consumers.

2018 WORLD ECONOMIC FORUM INSIGHTS

The Consumer Industries will change more in the next 10 years than they have in the past 40, at an ever-accelerating rate. As an increasingly empowered consumer and disruptive technologies drive the proliferation of new business models, companies must reinvent the enterprise to create innovative value propositions that address enduring consumer needs – while also continually adapting to changing market conditions. This demands a comprehensive change in each component of the operating model to define how technology will transform entire functions, how the organization holistically manages new workforce models, and particularly how the company can unlock value through cross-industry ecosystems.

The reinvention must not only deliver value for the business but also be orchestrated with a profound sense of responsibility for all stakeholders - consumers, the workforce, shareholders, communities and the environment.

The “Operating Models for the Future of Consumption” report outlines a vision of this comprehensive transformation, including a profound shift in culture and ways of working, fundamental changes in organizational shape and execution, and the ability to generate lasting performance and sustainable impact. The insights report also highlights the need for collaboration across stakeholders to responsibly manage the transition to achieve a brighter future for all stakeholders.

RECOMMENDATIONS

To capture the growth opportunities in emerging markets, multinationals can adopt an Integrated Distributor Engagement Model (IDEM) that integrates their route-to-market strategy with the capabilities of local distributors.

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